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AARP Asks the Fifth Circuit to Uphold the Rights of Retirement Plan Beneficiaries

The question before the U.S. Court of Appeals for the Fifth Circuit is: What must be pled in order to survive a motion to dismiss under new pleading standards established by the U.S. Supreme Court for cases involving plans that use employer stock as an investment option under the federal Employee Retirement Income Security Act (ERISA).   AARP filed a friend-of-the-court brief in Whitley v BP Oil, supporting beneficiaries’  position that they have adequately pled fiduciary breach claims to hold fiduciaries liable for declining stock prices.


The underlying claims in the lawsuit allege that plan fiduciaries imprudently failed to remove BP stock from its 401(k) plan following BP’s 2010 oil spill in the Gulf of Mexico and improperly monitored the appropriateness of the stock as an investment option.  That failure, the lawsuit alleges, led to significantly lower 401(k) plan values in which workers had invested and on which retirees (and future retirees) depended.

In a recent decision, Fifth Third Bancorp v. Dudenhoeffer, the Supreme Court invalidated the presumption that selecting or holding employer stock was prudent. AARP Foundation Litigation attorneys filed AARP’s brief in Dudenhoeffer asking the Court to invalidate that presumption. However, it was a mixed win as after making that finding, the Court also established new and apparently more stringent pleading standards. In fact, upon remand of this case the district court found that the plaintiffs had sufficiently alleged facts that met the new pleading standard. Because there was little guidance from circuit courts on these new standards, the district court permitted the defendants to request an interlocutory appeal from the Fifth Circuit Court of Appeals that was granted.

AARP Foundation Litigation attorneys filed a friend-of-the-court brief, on behalf of AARP, in support of the plaintiffs. The brief explained the policy considerations for giving a broad reading to complaints concerning employer securities claims. The brief points out that the plans at stake are the primary vehicle for retirement savings today, that participants in these plans rely on fiduciaries to select and monitor investment options, and thus breaches of fiduciary duties can have massive detrimental effects on workers and retirees. The brief also parses the history of ERISA and trust law on which it is based, as well as the Court’s ruling in Dudenhoeffer. The brief argues these all lead to the conclusion that the law intends to allow plaintiffs to bring claims to enforce their rights.

What’s at Stake

If Defendants are correct in their interpretation of the Supreme Court decision — that the Supreme Court placed its thumb on the scale in favor of defendants and required plaintiffs to plausibly allege that no prudent fiduciary could have concluded that the proposed alternative action would do more harm than good — then Plaintiffs’ prudence claims concerning employer stock would never survive a motion to dismiss.

Case Status

Whitley v. BP Oil is before the U.S. Court of Appeals for the Fifth Circuit.